How to create a roadmap to decarbonising your asset portfolio
A Wood viewpoint:
National emissions targets At the Paris Agreement in 2015,
governments acknowledged that their national climate targets at the
time would not meet the goal of limiting global warming to 1.5C.
2020 was the target year to submit long-term strategies and for
emissions to reach a peak2. Consensus is that the progress made
since 2015 has not been enough and an unprecedented effort is
required by countries to cut levels of emissions and get back on
track. Individual countries are adjusting their regulatory
landscape to meet emissions target commitments and a growing number
of governments have also set mid-century net-zero targets.
Carbon pricing The World Bank3 estimates that carbon pricing
schemes now cover about half of the emissions for regions that use
such mechanisms. Emissions do and will continue to increasingly
impact the balance sheet with the growing development of carbon
pricing, whether through emissions trading systems or carbon taxes.
The objective here is to shift the burden onto emitting operators
and developers. A carbon price also stimulates clean technology and
market innovation, fuelling new, low-carbon drivers of economic
growth.
Drivers of industrial decarbonisation High on the energy transition
agenda is the need to reduce the environmental impact and emissions
from carbon intensive industries. Energy, heat production and
industrial processes account for 55% of all global greenhouse gas
emissions1.
Wood viewpoint: How to create a roadmap to decarbonising your asset
portfolio
Operational efficiency and optimisation 45% of decarbonisation
goals can be tackled through better adoption of a circular
economy4. Resolving repeat failures that cause process trips or
shutdowns, stopping flaring and venting, ensuring operating
parameters have not moved significantly from original efficiency
levels, as well as finding and fixing asset-integrity issues that
contribute to fugitive emissions are not just emission mitigation
solutions, but offer substantial cost efficiencies and potential
monetisation opportunities for surplus power or captured gas.
Licence to operate Through the United Nations Sustainable
Development Goals over 170 organisations5 have committed to reach
net zero by 2050. The public face of business visibility is also
moving a pace with a greater emphasis on environmental, social and
governance goals and contributions. The sustainability and societal
impact of an investment is being increasingly scrutinised, and we
are seeing major emitters announce carbon reduction and ambitious
net zero targets on a regular basis.
Investment proposition 95% of fund managers see international oil
companies that are not responding to climate change-related risks
as unattractive investments6. In recent years mainstream investors
are following ethical investment groups in adopting criteria that
excludes organisations and commodities groups based on hydrocarbon
extraction and levels of carbon emissions. Furthermore, commitments
sought include not only hard targets to reduce extraction and
production emissions but also ‘indirect’ or Scope 3 emissions from
customers of their feedstock and products.
1. www.epa.gov/ghgemissions/global-greenhouse-gas-
emissions-data#Sector
5. sdg.iisd.org/news/177-companies-have-pledged-to-reach-
net-zero-emissions-by-2050/
6. uksif.org/wp-content/uploads/2019/04/Oil-Pressure-
Gauge-survey-booklet-2019.pdf
Wood viewpoint: How to create a roadmap to decarbonising your asset
portfolio
Ageing assets Companies are risking $2.2trn by 20307 if they base
investments on current emissions policies during the low carbon
transition. Older assets face more complex challenges in reducing
emission intensity, it is often less efficient and logistically and
economically challenging to replace or revamp. They contribute to
fugitive emissions as parts fail or degrade. With ageing assets,
there are multiple opportunities that can help drive significant
improvements. As well as environmental benefits, a stronger level
of governance around emissions also makes compelling commercial
sense.
Asset footprint It will be a necessity to examine geography and
geopolitics to reduce exposure to potentially stranded assets8.
Global industrial corporations are making enterprise-wide
commitments to emissions, but their production and processing
assets vary greatly in their geographic locations, both in terms of
numbers but also scale of operations. Furthermore, there is a
differing range of regulatory and legislative requirements within
the relevant country or region.
A continually evolving landscape and suite of interrelated
societal, economic and commercial complexities present challenges
to reducing emissions.
Challenges, complexities and vulnerabilities
Wood viewpoint: How to create a roadmap to decarbonising your asset
portfolio
Cost and subsidies The removal of subsidies is expected to increase
the installed capacity of renewables and the use of renewables in
electricity by making these technologies cost competitive9. The
speed of development and cost reductions within the low-carbon
sector has benefited from government and regulatory support. This
is as a result of legislation on the pricing of carbon emissions
from fossil fuels and subsidies for alternative technologies for
energy generation. It is expected that fossil fuel subsidies will
be phased out meaning carbon intensive operations are not able to
access subsidies in the way they have been able to.
Pandemic The current COVID-19 pandemic is having a debilitating
impact on the global economy10. With a significant drop in GDP and
major impact on capital expenditure in the short term. There is
increasing focus on financing future projects on greener, more
resilient and sustainable solutions. This is coupled with a need
for existing assets to be secure, resilient and producing at
optimal levels. Alongside decarbonisation options, many industrial
facilities will likely see a reduction in other harmful emissions
positively impacting on air quality.
Pace of innovation Existing infrastructure has been built over many
decades to support conventional energy uses. The rapid transition
to a decarbonised system will have implications for existing
infrastructure11. The pace of innovation and technological
solutions have a major part to play in decarbonisation, from the
technologies to generate and deliver new energy sources to the
digital innovations that will transform how we use them. Leveraging
data and digital technology also offers a less capital-intensive
route to optimise operational performance, target energy production
and minimise waste
7. carbontracker.org/oil-and-gas-companies-approve-50-
billion-of-major-projects-that-undermine-climate-targets-
and-risk-shareholder-returns/
11. www.worldenergy.org/assets/downloads/Innovation-
Insights-Brief-Energy-Infrastructure-Affordability-Enabler-
or-Decarbonisation-Constraint.pdf
Wood viewpoint: How to create a roadmap to decarbonising your asset
portfolio
What’s your decarbonisation SCORE? Operators and developers need to
map their journey to decarbonised assets.
You need to fully understand policy landscape and the carbon
baseline, before defining objectives and targets for
decarbonisation through benchmarking, assessing market impacts and
taking consideration of policy and corporate strategy. Then review
and map assets to enable development of decarbonisation pathway
scenarios.
As part of a wider delivery model, a SCORE screening process can be
applied to single or multiple assets, to a client’s full asset
portfolio or across a specific geography or region using an
evaluation assessment of opportunities to:
Substitute -substitution of fuel or feedstocks consumed for
renewable or less intensive sources. For example, switching
electricity provision to a renewable source or considering use of
renewable and bio feedstocks.
Capture - employing carbon capture technologies, or emissions
control technologies, to substantially reduce or eliminate harmful
emissions to the atmosphere.
Offset - considering assets or product portfolios across a country
or company-wide scale to achieve decarbonisation/clean air
goals.
Reduce - looking at holistic asset optimisation considering areas
around energy efficiency, digitalisation and operations and
maintenance best practise.
Evaluate - whatever your decarbonisation journey, it’s important to
apply a structured evaluation process to be able to map out your
decarbonisation journey to meet goals and lead to a successful
outcome.
Baseline auditObjectives / ToR Target setting
Offset
Policy impacts
Advise Assess
Wood viewpoint: How to create a roadmap to decarbonising your asset
portfolio
Integrate renewables Renewables are increasingly being integrated
into industrial process operations worldwide. In Russia, Gazprom
Neft is embarking on a project to build solar-power electricity
plants at its refining facilities. Shell has installed one of the
largest solar parks in the Netherlands at their Moerdijk Chemical
Plant. In upstream oil and gas, platforms in the North Sea have
introduced renewable power sources. Opportunities also exist for
operators to supply power to third parties.
Optimise process and energy efficiency Looking at process
optimisation is key within the business model to ensure operators
are able to maximise throughput and efficiency across their
operations. This is inter-related with the selection of technology
and practises to ensure energy efficient design. For example,
minimising waste streams and energy leakage, throughout all aspects
of process delivery and operations.
Detect and repair leaks Leaking equipment is the largest source of
emissions of carbon dioxide and air pollutants from oil and gas
processing, refineries, and manufacturing facilities. Digital
solutions can enhance the detection, asset integrity and response
implementation with significant impact on emissions and reducing
product losses, as well as increasing safety for the workforce and
surrounding community.
Replace feedstock Operators can consider other feedstocks over
petroleum and natural gas, alternatives like biofuels present
opportunities for production and use. Replacing or supplementing
traditional fossil feedstocks with bio-based alternatives will
reduce emissions. This is a developing area where technology is
largely based around biofuels, biomass and biochemicals. It is also
an area that is emerging in the hydrogen production arena, through
the use of bio-feedstocks.
Understand the opportunities The pathway to reduce the carbon
emissions of extractive and process industries will need to
leverage a breadth of solutions and will be bespoke to particular
geographies, enterprise portfolios and individual assets.
Capture carbon CCUS is one of the technologies that can be deployed
at scale to support the decarbonisation of multiple sectors: heat,
transport, heavy industry and power generation. It also ensures
efficient system integration in applications where it can use
existing gas infrastructure for transport and storage. Carbon
capture offers huge potential to neutralise the impact of fossil
fuel production and is an area that is advancing in affordability
and scale.
Offset emissions Investigating the benefits of carbon offsetting
through carbon markets is only part of an overall reduction
strategy. But it does present two opportunities for organisations
to approach emissions reduction. One through compliance markets
that are operated by government and require companies to account
for emissions. The other is carbon offsetting through participation
in sustainable projects.
Balance portfolios Oil and gas majors can’t rely on the status quo
given recent market fluctuations and the legislative requirement to
reduce emissions. In recent years broader business models are
moving organisations increasingly towards power and
utilities.
Wood viewpoint: How to create a roadmap to decarbonising your asset
portfolio
Wood. Powered by possible The need for change has never been
greater. In our industries, in the way we treat our planet, and in
how we live.
To challenge the status quo we must be brave – it’s having the
courage to forge new answers. We’re more than 45,000 inquisitive
minds, on a quest to unlock solutions to the world’s most critical
challenges, across all of energy and the built environment.
United by our mission to create a sustainable future as the world
evolves to a cleaner planet. Our bold spirit drives us to lead the
charge, our actions transform challenges into solutions, and our
curiosity keeps us pushing, innovating, making the impossible…
possible.
Because we understand the time for talk is over. Because the world
needs new answers to old challenges. Because at Wood, we are future
ready, now.
woodplc.com
Contact us: If you would like to discuss any of the points raised
in this paper in more detail, then please get in touch.
Dan Carter Global Technical Leader Oil & Gas Consulting
E:
[email protected]